Digital transaction was India's preferred payment option during sales

Digital transactions trumped cash on delivery as India's preferred payment option for online purchases during this year's mega festive sales, signalling a maturing of customers and significant progression for the electronic marketplace and payments sectors.

Ecommerce as well as digital payments companies reported an increase in electronic payments during last month's festive sales hosted by the country's top online marketplaces. The ecommerce bonanzas have also provided payments companies stellar spikes in transaction volumes from the increasing use of digital transactions for online purchases.

Amazon India said nearly 55% of all transactions during its flagship Great Indian Festival sale two weeks ago were done using a mix of net banking and debit and credit card payments. During last year's edition, digital payments accounted for 42% of all transactions on the platform. At Paytm Mall, which hosted its first festive season sales last month, fewer than 1% of all orders were paid for by cash on delivery , mainly because of the company's high cashback offers for payments made through its digital wallet.

“Digital payments adoption this time was higher than cash on delivery mainly because of the cashback offers by ecommerce companies," said Satish Meena, senior forecast analyst at Forrester Research. “The advantage for ecommerce companies to push for digital payments is to ensure fewer cancellations and cut down on costs of cash management."

Analysts, on average, estimated that digital payments comprised 55-60% of all ecommerce transactions during the festive sales. Typically, payments by cash on delivery account for about 60% of all ecommerce purchases on regular days.

Although cash on delivery provided a significant nudge to ecommerce adoption in a country wary of shopping online, it imposed substantial financial cost on online retailers. This was also because cash on delivery contributed to high rejection rates on orders, typically in categories such as fashion. To put the growth of digital payments in perspective, payments gateway PayU India recorded 166 transactions per second during the festive sales, a huge jump from 16 transactions per second during last year's sales. On a normal day, PayU sees 3-6 transactions per second. The company, which works with several ecommerce platforms including Flipkart, registered `1,000 crore worth of transactions in just four days during the festive sales period.

Another payment gateway TechProcess, which was acquired by French electronic payments company Ingenico this year, also cited a surge in transactions. “Compared to 2016, we achieved six times growth in gross transaction value during the festive sales," said Sunith Menon, MD, Ingenico India.

During the sale period, TechProcess achieved nearly a 150% spike in volume of transactions over a normal day. For payment gateway CCAvenue, contribution from online retail to its total revenue rose to 36% during the sale period from 22% on a normal day. CCAvenue works with Flipkart, Snapdeal, Shopclues and other ecommerce companies. “The total transaction volumes were up by 40% over a normal day," said CEO Vishwas Patel.